Published in September by Statec, the figure is quite startling. In Luxembourg in 2023, around 122,450 people were living on less than €2,382 a month. This puts them “at-risk-of-poverty”, according to the official terminology. The number represents 18.8% of the grand duchy’s population.
The at-risk-of-poverty threshold corresponds to 60% of the national median standard of living (that is to say, the income level that divides the population into two equal groups: 50% of people earn more than this amount, 50% earn less). Compared with 2022, 14,000 more people lived below this threshold in 2023. "Luxembourg is therefore moving away from its target of reducing poverty by 4,000 people by 2030", noted in its latest “Report on work and social cohesion 2023”.
Over a longer period, "there has been a clear upward trend in the at-risk-of-poverty rate since 1996", the statistics bureau pointed out. However, for the last five or six years, the situation has been fairly stable; moreover, the series is marred by methodological changes. Around an upward trend, there is a seesaw evolution, depending on the economic and social conditions at the time. Statec forecast a slight improvement in the rate, under the effect of measures to support household purchasing power.
Trends in income inequality
Change in the Gini coefficient between 1996 and 2023 (0 = perfect equality; 1 = perfect inequality). Source: Statec, EU-SILC 2003-2023
The outgoing director of Statec, , nevertheless questioned the origin of this 'high' rate in Luxembourg, which is higher than the EU average (16.2% in 2023). "We don't have the answer, we only have elements of an answer," he stated.
In his view, the most plausible explanation lies in the changing composition of the labour market: "Luxembourg has attracted a lot of people with advanced qualifications earning high incomes, particularly in the financial sector. They have gradually pushed up the median income. The gap with low earners has widened, leading to a creeping polarisation of the wage society."
Added to this is the cross-border effect, which also influences the distribution of incomes in the country: "A large proportion of what could constitute the country's middle class-lower middle class live abroad while working in Luxembourg," observed Jean-Baptiste Nivet, an economist at the Idea Foundation, the Chamber of Commerce’s thinktank. Other national specificities: “The wage curve closely follows that of age, which is the case in virtually no other EU country. And non-wage income also contributes to this polarisation, such as pensions and rental income - both of which are high by international standards.”
A sizeable proportion of the population earns between 50% and 60% of the median income.
But every indicator has its limitations. The first of these is that the at-risk-of-poverty rate does not take account of the cost of housing: it considers income including social transfers (pensions, family allowances, etc.) offset by taxes. "Given the cost of housing in Luxembourg, the poverty situation is perhaps even worse than the indicator suggests," pointed out Nivet.
At the same time, he said, while the rate in Luxembourg is historically high, the people concerned are rather close to the at-risk-of-poverty threshold. In other words, in statistical terms, the poor are not so poor.
Nivet compared the at-risk-of-poverty indicator calculated by Statec for Eurostat with the poverty rate produced by the OECD. The main difference is that for Eurostat, a resident is at-risk-of-poverty if they earn less than 60% of the median income of the population, whereas for the OECD, the poor earn less than 50% of the median income. Looking at the Eurostat numbers, Luxembourg's rate is clearly higher than those of France (15.4% in 2023) and Belgium (12.3%), while at the OECD, the three rates are close (LU: 9.6%, FR: 8.5%, BE: 7.8% of the population in 2021). "This means that a fairly large proportion of the population is between 50% and 60% of the median income," Nivet concluded.
Consider benefits in kind
Another indication that the picture may be less gloomy than it seems: "Certain important measures in social policies aimed at combating the risk of poverty in recent years are not taken into account in the calculation" of the rate, according to the Ministry for the Family. "In particular, benefits in kind, such as free school books, free meals in canteens for pupils from low-income households, free public transport, free childcare and 20 hours of free supervision for children, and the childcare service voucher (CSA) system are not reflected."
According to Statec estimates for 2022, including the CSA in the calculation of the at-risk-of-poverty rate would reduce it by 2.2 percentage points, while the at-risk-of-poverty rate for children would fall by around 7 percentage points.
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In addition, the family ministry said, "the widespread non-use of certain social benefits is not taken into account in the Statec estimates, which only reflect the social transfers from which recipients have actually benefited. Given that the rate of non-take-up of rent subsidies, for example, is estimated to be around 80%, we can conclude that even though Luxembourg's social system is highly effective, it is struggling to have an impact on potential beneficiaries”.
And the ministry pointed out that "the final report on the evaluation of the social inclusion income (Revis) scheme concludes that social transfers in almost all cases cover the reference budget established by Statec, which corresponds to the minimum to live decently in the country - provided that eligible beneficiaries actually take advantage of their social rights".
Read the original French-language version of this news report